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Deadlines, Debt Limits, and EARNINGS

Minnesota’s shutdown and the current negotiations in Washington, D.C. surrounding the debt ceiling have been capturing the national and market headlines in recent weeks. They highlight the potential risks of a “policy error” that could severely impact the markets. A potential default by the U.S. Treasury or even a delay in payments could send markets into turmoil and cause interest rates to rise.

So far the Federal Reserve has been decisive and steady in administering our nation’s monetary policy. We think Congress will eventually successfully address our nation’s long-term fiscal policy problems and rising debt levels and deficits. From the heated rhetoric and partisan divide a compromise will eventually emerge-probably at the last minute, as usual. The solution will probably please no one-but that is the essence of compromise.

Behind the headlines and debt negotiations, companies have begun to report 2nd quarter earnings over the past two weeks. The results have been impressive, with double-digit earnings and revenue growth for many companies. Recent hiring surveys show that many companies plan to increase hiring later in the year.

We understand the concerns of those clients who want to reduce their risks levels as the government debt deals drag on; and the “policy error” risk is real and uncertain. But behind the headlines stocks are posting solid profits and there are signs that the recent soft patch in the economy could be ending. This is a good sign for long-term investors!

If you have any questions at all please do not hesitate to call!

Have a great day!

Bob and the All Star Team

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